Chapter 8 - New Product Development Flashcards
What is new product development?
The development of original products, product improvements, modifications, and new brands, through the firm’s own R&D efforts
Why develop new products?
Developing new products to replace aging ones
Life-cycle strategies:
- Adapt to changing tastes, technologies, and competition, as products pass through the life-cycle stages.
What are some of the reasons that new products fail?
Market size was overestimated
Actual product was not designed as well as it should have been
Incorrectly positioned in the market
Priced too high
Advertised poorly
Costs of NPD were higher than expected
Competitors fighter harder than expected
What are the 8 steps in developing a new product?
- Idea generation
- Idea screening
- Concept development and testing
- Marketing strategy development
- Business analysis
- Product development
- Test marketing
- Commercialization
Explain the idea generation step?
The systematic search for new product ideas
Internal sources: brainstorming, employees from all departments, R & D
External sources: customers, competitors, distributors, suppliers, and others.
Crowdsourcing: inviting broad communities of people – customers, employees, independent scientists and researchers, and even the public at large – into the new product innovation process
Explain the Idea screening step?
The purpose is to identify good ideas and drop poor ones to avoid spending any more money on developing them
Criteria used:
- Is it real? real need and desire for the product
- Can we win? Competitive advantage; resources
- Is it worth doing? Fit company’s growth strategy; sufficient profit potential
Explain the Concept Development and Testing step?
Concept development creates a detailed version of the idea stated in meaningful consumer terms.
Concept testing: testing new product concepts with a group of target consumers to find out if the concepts have strong consumer appeal.
Explain step 4: Marketing strategy development
Designing an initial marketing strategy for a new product based on the product concept.
1st statement describes the target market, product positioning, and sales, market share, and profit goals for the first few years.
2nd statement outlines the product’s price, distribution, and marketing budget for the first year.
3rd statement describes the long-run sales and profit goals, and the marketing mix strategy.
Explain step 5: Business Analysis
Review of the sales, costs, and profit projections for a new product to determine if they will satisfy company objectives
Explain step 6: Product development
Developing the product concept into a physical product to ensure that it can be done
- Requires large investment
- Building a prototype
- Testing for safety, durability, and acceptability
Explain step 7: Test marketing
Testing the product and marketing program in realistic market settings
The amount of test marketing needed varies with each new product
Gives the marketer an experience with marketing a product before full introduction
Testing takes time, and costs can be high.
Alternatives to standard test markets
- Controlled test markets
- Simulated test markets
Reasons for using alternative test markets
- Reducing the costs
- Speeding up the process
Explain step 8: Commercialization
Introducing a new product into the market
Large investment required
Considerations for launching a new product
- When to launch
- Where to launch
– Single location, region, national market, or international market
What are the 3 type of new product development?
Customer-centered new product development:
- Focusing on finding new ways to solve customer problems and create more customer-satisfying experiences
Team-based new product development:
- Various company departments work closely together, overlapping the steps in the product development process to save time and increase effectiveness.
Systematic new product development
What is the Product life cycle (PLC)?
The course of a product’s sales and profits over its life
Competition and rate of technology change can influence the length of a PLC
What are the 5 stages of the product life cycle?
- Product development
- Introduction
- Growth
- Maturity
- Decline
